Collector - August 2018 - 50

COMPLIANCE
To Whom the Debt is Owed
These takeaways from Deleon v. Action Collection Agency of Boston
can help ensure your validation letters are as compliant as possible.
By Laura Dadd
D
emand letter, validation letter and
dunning letter are all names for the
communication required by Section
809 of the Fair Debt Collection Practices
Act. The many requirements of this section
have been fodder for extensive amounts
of FDCPA lawsuits. One requirement in
particular, found in Section 809(a)(2), is
the necessity to provide the name of the
creditor to whom the debt is owed.
Given that the statute is ambiguous as
to how and where the name of the current
creditor is provided in the validation letter,
it's easy to see how this clause is a source of
FDCPA litigation. A recent case from the
Southern District of New York offers some
clarity on this issue and the details of which
provide some insight into creating compliant
validation letters.
In Deleon v. Action Collection Agency
of Boston, the consumer alleged that the
collection letter sent to her by the debt
collector failed to sufficiently identify the
name of the creditor to whom the debt was
owed and was therefore misleading to the
least sophisticated consumer. The letter
in question placed the creditor's acronym,
under which the company was licensed to
do business, in the caption of the letter along
with various information related to the debt,
including the consumer's account number
and the balance.
The court found that upon examining the
letter as a whole it identified the relationship
between the creditor and the debt collector.
Because the first line in the body of the
letter states, "The above-named creditor
has referred your account to us[,]" and the
creditor's name did in fact appear above
the first line, the court found that this was
enough to establish that the creditor and the
sender of the letter are distinct to the least
sophisticated consumer.
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The court also found that the use of an
acronym does not prevent the consumer
from understanding it to be the name of the
creditor. The FDCPA allows a creditor to use
a commonly known acronym or any other
name that it has used from the inception of
the credit relationship. Since the creditor
in this case was registered to do business
under its acronym and the FDCPA does
not mandate that creditors be identified by
their full legal name, the court found that
the use of the creditor's acronym in the
debt collection letter properly identified the
creditor. The court also found that because
the least sophisticated consumer would
understand that the letter was sent on behalf
of the creditor by a third-party debt collector
that it was not false, deceptive or misleading.
A careful review of this decision can
supply those who participate in debt
collection with possible compliance
strategies. When considering where to
place the creditor's name in a validation
letter, debt collectors, in many jurisdictions,
must consider whether or not the least
sophisticated consumer will understand it
to be the current creditor when they read
the letter.
If a collection agency chooses to put the
current creditor's name in the caption of the
letter, it must be sure that the body of the letter
creates an implicit relationship between the
name in the caption and the letter. In other
words, the letter must refer to the creditor's
name in the caption in a way that the consumer
will make the connection that the name in the
caption is the current creditor.
Finally, when deciding if it's necessary
to use the creditor's legal name versus an
acronym or other shortened version of the
creditor's name, the best choice may be
the name the consumer has had the most
exposure to. The FDCPA is silent as to
whether or not the validation letter must use
the full legal name of the current creditor.
However, case law, including this case, has
demonstrated the importance of properly
naming the creditor. Debt collectors may
want to review the underlying contract with
the consumer or other correspondence
between the consumer and the creditor to
determine if using a name other than the full
legal name of the creditor would be the least
confusing to the consumer.
There's no denying that validation letters
have many requirements that can be a
potential cause for litigation. However, careful
construction of these letters can help to avoid
liability. Also, having a qualified attorney
review and approve validation templates may
help to avoid consumer litigation. As with
the case discussed here, when choosing what
name to use for the current creditor and
where to put the name, debt collectors will
want to make sure the consumer understands
to whom the debt is owed.
Laura Dadd is ACA International's
compliance analyst.
ACAINTERNATIONAL.ORG